New HHS “family penalty” rule leaves spouses, children unprotected

posted at 12:41 pm on February 8, 2013 by Ed Morrissey

Just how complicated will ObamaCare get for employers, workers, and families? Politico’s analysis of a decision by the Obama administration and HHS may take several readings to understand exactly how a bill that purports to insure children and spouses may end up leaving them in the cold, and how employers may end up footing more of the bill than Congress claimed when it passed the ACA.

At issue is the question of whether to subsidize additional insurance for workers who can afford their employer-based health care coverage for themselves, but not for their families. Not doing so forces either the worker or employer to pay more of the premium; doing so would explode the subsidy cost for ObamaCare, which has already gone up nearly 40% from original estimates before the first subsidy dollar has been spent. HHS decided against expanding the subsidy even further, but that has real-world implications that won’t make ObamaCare supporters happy:

The Department of Health and Human Services finalized the so-called family penalty in a rule last week. That means the test of whether insurance is affordable is based on the amount the worker pays for their health insurance — not on the cost of the policy for that worker’s whole family.

More specifically, if a worker can pay for employer-sponsored coverage for less than 9.5 percent of income, then dependents won’t be able to get subsidies on the health insurance exchanges that start next year. The health law uses a measure called the modified adjusted gross income to determine eligibility.

So to the dismay of many advocates of health coverage expansion, spouses and kids could fall through the cracks.

The Government Accountability Office, using 2009 data, estimated that about 7 percent of uninsured children — 460,000 — would remain uninsured because parents wouldn’t be able to afford coverage for the whole family.

Don’t forget, too, that the overall benefit of these plans will decrease in order to meet that 9.5% threshold in the first place. Not only will families possibly fall through the cracks, but the worker will have a less-beneficial policy, too.

Brett Norman walks us through a scenario with a worker at 200% of the federal poverty level:

Take a family of three in Florida making $40,000 a year — just over twice the federal poverty level. If one parent works part time and makes $10,000, and the other works full time for a large employer for $30,000, that company would have to offer an individual policy that wouldn’t cost the full-time employee more than $3,800 — 9.5 percent of household income.

For the individual — that shouldn’t be a problem. The average employee paid $951 for insurance in 2012, with the employer paying the rest of the premium, according to the Kaiser Family Foundation. That’s well below that $3,800 threshold.

But employers often chip in less toward the family coverage. And while the health law does require them to offer coverage for kids — though not for all adults in the family — there’s no legal requirement that they make it affordable.

The average employee contribution for a family policy is $4,316 — which is steep for a lot of families. And if the employer isn’t subsidizing it, the cost could be $15,745 — in the case of the hypothetical Florida family, more than half of the primary breadwinner’s earnings.

Head spinning yet? Here’s where it gets interesting. Some of these children could be covered under the Childrens Health Insurance Program (CHIP), but some states cut off eligibility at 200% of the federal poverty level. Also, CHIP’s funding runs out in 2015, as ObamaCare was supposed to address the issue of uninsured children. If CHIP doesn’t get funding extended, then Obama will have pushed families out of the private health insurance they otherwise would have had, while leaving children with no public assistance options — and that will be true immediately for children of households that make 200% or more of the federal poverty level.

What happens when employers start getting pressured by workers to lower family-insurance costs? First, as Norman writes, they’ll probably get tougher on determining whether the dependents claimed are actually dependents. However, don’t forget that ObamaCare also mandates that family insurance cover “children” to age 26, which makes the entire exercise even more expensive that it already was. The other option — to dump insurance altogether and force employees to go onto the ACA-mandated exchanges and pay the penalties instead — will begin to look mighty tempting. That will create an even bigger explosion in subsidy cost as millions of otherwise-insured workers and their families have to begin looking for insurance on the individual market.

Also, be sure to check out Ramirez’ terrific collection of his works: Everyone Has the Right to My Opinion, which covers the entire breadth of Ramirez’ career, and it gives fascinating look at political history. Read my review here, and watch my interviews with Ramirez here and here. And don’t forget to check out the entire Investors.com site, which has now incorporated all of the former IBD Editorials, while individual investors still exist.

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The 30-40k range is the range of my neighborhood. I’m trying to figure out how Mr Sanchez, or Ms Smith is going to decide what to pay. My guess it will be the rent. When the IRS figures this out I assume there will be a you-paid-the-rent-why penalty.

Every single time this BarryCare issue comes up I think back on Eva prancing around the office in ’08 announcing the good news of her “free” health care. Her Humana has since switched to BlueCross which I assume will soon be switched to URonURown.

The patience of American taxpayers is apparently limitless. In any other country subjected to such outlandish robbery, citizens would be burning their politicians at a stake, and not just in effigy. All that stands between Vladimir Putin and an angry mob is the governmental monopoly on assault weapons… oh wait, that reminds me of something…

We have to pass the bill before we can know what is in it….and then change the rules as we go along to pretend we can pay for it…and then Blame conservatives who balk at our nifty media spin…While we pressure governors to accept our changing rules for exchanges the Federal Government can’t pay for while the IRS hires more agents to collect penalties that will never go to reducing the cost of expanding government but may pay for salaries on New Death Panels that will decide who lives an dies according to Paul Krugman’s ecnomic models…Cause Economist Paul Krugman & Preezy Obama won Prizes or something…

The 30-40k range is the range of my neighborhood. I’m trying to figure out how Mr Sanchez, or Ms Smith is going to decide what to pay. My guess it will be the rent. When the IRS figures this out I assume there will be a you-paid-the-rent-why penalty.

Limerick on February 8, 2013 at 12:50 PM

Why do you think they are trying to grab our guns before all this takes effect?

As Fast and Furious has shown us if Newtown hadn’t happened, Holder would have sent his own thugs in to shoot the kids.

When the economy crashes and the dollar collapses and there are riots in the streets, and the cause of it all finally starts pointing back to Obama — I wonder if Chris Rock, Danny Glover, and the multi-racial MSM etc., will ever admit they were wrong and they were only worshiping Obama because he’s half black.

When the economy crashes and the dollar collapses and there are riots in the streets, and the cause of it all finally starts pointing back to Obama — I wonder if Chris Rock, Danny Glover, and the multi-racial MSM etc., will ever admit they were wrong and they were only worshiping Obama because he’s half black.

The Rogue Tomato on February 8, 2013 at 1:07 PM

Obama will still be blaming George W. Bush or anyone not named Barack Hussein Obama as he’s marched into the gallows for his crimes.

I honestly don’t think the average low-info voter knows most of what we are discussing on a host of issues. And because most do not engage in any critical thinking and connecting the dots….they are in for a real “surprise.” When they can’t get coverage or get less coverage than they are getting now….added to seeing Nurse Practitioners instead of MDs or having to wait more hours then they do now or then being told they can’t have or will have to wait months to have procedures……….Good times are coming /sarc.

It is all about the government having access to people’s personal date; bank info, payroll etc.

When you have 47 million people on Foodstamps + another 8 million on disability+ another XXX million living off other welfare programs…they all figure the govt. will pick up the tab for them and will continue to vote the Democrats in.

Obama will be known as the worse President the United States has ever had.

To arrive at your modified AGI, start with your adjusted gross income and then add back the following items:

Any deduction you claimed for a regular contribution to a traditional IRA.
Any deduction you claim for student loan interest or qualified tuition and related expenses.
Any income you excluded because of the foreign earned income exclusion.
Any exclusion or deduction you claimed for foreign housing.
Any interest income from series EE bonds that you were able to exclude because you paid qualified higher education expenses.
Any employer-paid adoption expense you excluded.
Any amount claimed as domestic production activities deduction.

Note that you are not required to add back any contribution you made to an employer plan such as a 401k plan. If you are running up against the limit for modified AGI, one way to reduce that number is to make deductible contributions to an employer plan.

Of course, this was just the first link I found when searching on how to figure MAGI. If this is wrong, or if another formula will be used for PPACA, I would appreciate if someone pointed me in the right direction.

I still think there might be an up-side to the exchanges. One of the problems with the insurance system we have had is that consumers were shielded from costs, because their employers were picking up the tab.

Maybe, if fewer people are getting insurance automatically, and more are actively shopping for it, we can reconnect people with costs.

Then, when Obamacare crashes and burns, we can build a rational system where people purchase their own insurance and are aware of the costs and benefits.

they’ll probably get tougher on determining whether the dependents claimed are actually dependents.

There’s no probably about it, my employer has already started. I had to dig up my marriage license from 42 years ago and last years 1040 to prove my wife was eligible…the 51% that voted for that thing in the WH have no idea what they’re in for. I hope they get hit the hardest…

I honestly don’t think the average low-info voter knows most of what we are discussing on a host of issues. And because most do not engage in any critical thinking and connecting the dots….they are in for a real “surprise.” When they can’t get coverage or get less coverage than they are getting now….added to seeing Nurse Practitioners instead of MDs or having to wait more hours then they do now or then being told they can’t have or will have to wait months to have procedures……….Good times are coming /sarc.

The average “low info voter” doesn’t know the difference between a NP & a MD. They will never notice the extra hours as they play games on their iPhone13. They may not even notice when they are simply given pain killers and told to go home & rest until dead. The average “low info voter” doesn’t know or care that they are a “low info voter”.

ObamaCare was fashioned to help some 35-million uninsured folks in America.

Apparently, nobody looked at that from the other side: that is, that there were near 300-million insured folks – without an insurance mandate and not waiting for some medically-forced event to seek insurance. 89% covered without government forcing.

Now, with ObamaCare, it looks like the uninsured problem is going to get worse. 2,700 pages of law, $2.5-trillion, Heaven knows how many volumes of regulations – all to make a problem worse!

Just…amazing. The stupid is strong: it seems the majority of American voters really do need to touch the hot stove to understand how it burns.